BofA: This Is Our Biggest Concern For The Remainder Of The Year
Here Martin notes that that plenty of countries already have total non-financial debt in excess of 250% of GDP, and in particular a number of European countries. And the fragilities are across many parts of the economy. For instance, note the high numbers for:
- Household debt in Denmark, the Netherlands and Switzerland;
- Corporate debt in Sweden, Ireland, Spain, Netherlands and Belgium; and
- Government debt in Japan and Italy
Moreover, the BofA strategist adds that from a flow rather than a stock point of view, a number of countries have seen a rapid rise in their debt/GDP levels during the last decade, especially those where leverage was low after the Global Financial Crisis. Note, for instance, the jump in:
- Household debt (Chart 14) in Sweden, Canada and Norway, commensurate with property prices having risen dramatically here; and
- Corporate debt (Chart 15) in China, Switzerland, France (and Belgium – although the number is exacerbated by the tax environment).
BofA won't be the only one concerned about the level - and repricing - of corporate debt. As we reported last month, one man's crisis is another man's opportunity, and it is none other than distressed investing legend Howard Marks and his Oaktree, that is already eagerly looking forward to what it described as a "flood of troubled credits topping $1 trillion as rising interest rates overwhelm low-quality loans and bonds."
Speaking at the Bernstein Strategic Decisions Conference, Oaktree Capital's Chief Executive Jay Wintrob said that when the cycle turns it will be faster and larger than ever as "fallen angels" proliferate, and added ominously that "there will be a spark that lights that fire."
It increasingly appears that Trump's global trade wars could be just the spark that lights that particular conflagration.